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Microsoft to Expand Advertising Pact with Facebook

Reuters
Thursday, 24 Jul 2008 | 4:11 PM ET

Microsoftwill announce plans to expand its relationship with online social network Facebook to provide Web search and search advertising, a source familiar with the matter said on Thursday.

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Microsoft CEO Steve Ballmer is addressing analysts today, and CNBC's Jim Goldman has the latest.

The expanded deal follows Microsoft's decision not to pursue a takeover of Yahoo to bolster its online search and advertising business as it tries to compete with Internet leader Google . (See the accompanying video for more on the latest from Microsoft's CEO.)

Microsoft bought a 1.6 percent stake in fast-growing Facebook for $240 million in October, beating out Google in the investment. At the time, it reached an exclusive deal to sell ads on Facebook outside of the United States.

Facebook Invites Outside Software Programs

Separately, Facebook said it's introducing more tools to help the software applications fueling the online hangout's popularity and is promising to intensify its efforts to weed out programs that violate its rules for protecting users' privacy.

Mark Zuckerberg, Facebook's precocious chief executive, outlined the steps in a programmers' conference that underscored the growing influence of the Web site that he started 4 1/2 years ago in his Harvard University dorm room.

A crowd of about 1,500 programmers turned out to hear Zuckerberg discuss how he hopes to make it easier for people to share information and entertainment wherever they go on the Web.

Zuckerberg, 24, is counting on programmers who aren't employed by Facebook to play a vital role in realizing his vision.

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More than 30,000 applications have been designed to run on Facebook since the company opened its site to outside developers 14 months ago. The most successful applications have been embraced by millions of Facebook users, helping to turn the startups that developed them into hot commodities. (See the accompanying video for more from Zuckerberg.)

Facebook estimates that the makers of its top applications have raised a combined $200 million from venture capitalists. The applications offer a wide variety of features, including sharing photos, recommending music and playing games.

"I have to credit Facebook with a large part of our success," said Hadi Partovi, president of iLike, which offers a music-recommendation application. Partovi said about half of iLike's 30 million users signed up through Facebook.

As the number of outside applications have swelled, Facebook's users have ballooned from 24 million in May 2007 to about 90 million today. The rapid growth has narrowed MySpace.com's lead in the Internet's social networking niche and helped privately held Facebook secure a $240 million investment from Microsoft Corp.

Zuckerberg is setting out to broaden the appeal of Facebook's outside applications by giving programmers access to Facebook's tools for translating into 20 different languages.

Facebook also is trying make it easier for its users to transplant their personal profiles and favorite applications to other sites.

The "Connect" initiative, announced in May, moved a step closer to fruition Wednesday with the opening of a "sandbox" for programmers to begin making their applications more portable. Two dozen Web sites, including Digg, Citysearch and Movable Type, already have signed up for Connect. Facebook expects the feature to debut in autumn.

Having so many outside applications on its site has occasionally caused headaches for Facebook, too. Some applications have included security holes that gave Web surfers unauthorized peeks at the personal profiles of Facebook users while other programs "tricked people into doing things that they didn't want to do," iLike's Partovi said.

Facebook has already removed about 1,000 abusive applications since it opened up its Web site to outside programmers and plans to move even more aggressively as it establishes clearer ground rules for operating on its site, said Benjamin Ling, Facebook's director of platform program management.

Besides banning abusive programs, Facebook plans to endorse applications it considers to be "great." Facebook expects the applications that get its seal of approval to be more appealing to the site's users. ILike and Causes, a program for promoting philanthropy, are the first programs to get Facebook's blessing.

Rating the applications "is a huge shift in philosophy for Facebook," said Sean Parker, Causes' chairman and a former Facebook executive who remains close to Zuckerberg. "Every developer involved with Facebook is going to either walk out of here elated or scared to death."

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